Microsoft has announced a free, ad-supported version of Office 2010 that will ship with new PCs.

Office 2010 Starter Edition is a "reduced-functionality" version of the Office suite offering only Word and Excel, and "a simple path to upgrade to a fully-featured version of Office 2010 directly from within the product."

The company hasn't announced how Word and Excel Starter will differ from their full-priced brethren, beyond claiming they'll offer similiar functionality to the oft-maligned Microsoft Works - which the package is set to replace.

The package will be supported by adverts which will appear in an panel in the lower-right-hand side of the window. While this could become very annoying, the company believes it's a step up from the trial editions it has offered in the past.

"Office Starter is different than a trial, in the sense that there's no expiration," says Scott Kahler, the test manager for the new suite. "You can continue using it until your needs exceed what Starter can give you."

Clearly, Microsoft hopes Starter Edition will offer a springboard for consumers to upgrade to the full version, and in an effort to make that leap as easy as possible the company has also introduced new installation features.

New PCs will now be shipped with Office 2010 Professional, Home, Business and Student editions pre-installed. The user can then upgrade to the version they want using activation cards that will be sold through "major electronic retail outlets".

These will feature a license code to start using the software. Microsoft has not confirmed how much space on a hard drive this feature will take, or the retail outlets who will be offering the activation cards.

The other innovation in Office 2010 is "Click-To-Run", which was unveiled in the Technical Preview. This feature streams pieces of Office 2010 to users who just want to try it out, allowing them to get going in minutes while the remainder of the suite continues to download in the background.

Office 2010 is currently being tested in invite-only preview, with a full beta expected for release later in the year.